The Reno Company Manufactures part no. 498 for use in its production cycle. The cost per unit for 20,000 units of part no. 498 is as follows
- Direct Materials$6
- Direct Labor30
- Variable Overhead12
- Fixed Overhead16
The tray company has offered to sell 20,000 units of part no. 498 to reno for $60 per unit. Reno will make the decision to buy the part from Tray if it produces a net incremental benefit of $25,000 for reno. If reno accepts Tray's offer $9 per unit of the fixed overhead applied would be totally eliminated. Futhermore, Reno has determined that the released facilites could be used to save relevant costs in the manufacture of part no. 575.How much savings must be attained in the production of part 575 inorder to produce a net increamental benefit of $25000?